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The impact of exogenous shocks on house prices: The case of the Volkswagen-emission scandal

Author

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  • Heiko Kirchhain
  • Joachim Zietz
Abstract
The study demonstrates that real estate prices react in a statistically significant manner to exogenous announcement effects that may affect regional employment opportunities. We analyze the impact of the announcement of the VW emissions scandal on 9/18/2015 on house prices in the vicinity of Chattanooga, TN, the location of the only current VW production plant in the United States using quantile regression-analysis. Our results indicate that the announcement of the VW emission scandal lowered average, quality adjusted sale prices by an average of 3.3 percent 31 to 60 days after the announcement and by 4.5 percent after 61 to 90 days. There are no statistically significant effects after 90 days. The quantile regressions show that in particular the mid-price range is negatively influenced by this exogenous shock. Our robustness checks show that the price impact increases with proximity to the production plant.

Suggested Citation

  • Heiko Kirchhain & Joachim Zietz, 2018. "The impact of exogenous shocks on house prices: The case of the Volkswagen-emission scandal," ERES eres2018_204, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2018_204
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    More about this item

    Keywords

    Announcement effect; Hedonic house price model; Quantile Regression; VW emission scandal;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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